[Congressional Record Volume 145, Number 111 (Monday, August 2, 1999)]
[House]
[Pages H6776-H6779]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




          CONSTRUCTION INDUSTRY PAYMENT PROTECTION ACT OF 1999

  Mr. HORN. Mr. Speaker, I move to suspend the rules and pass the bill 
(H.R. 1219) to amend the Office of Federal Procurement Policy Act and 
the Miller Act, relating to payment protections for persons providing 
labor and materials for Federal construction projects, as amended.
  The Clerk read as follows:

                               H.R. 1219

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Construction Industry 
     Payment Protection Act of 1999''.

     SEC. 2. AMENDMENTS TO THE MILLER ACT.

       (a) Enhancement of Payment Bond Protection.--Subsection 
     (a)(2) of the first section of the Miller Act (40 U.S.C. 
     270a(a)(2)) is amended by striking the second, third, and 
     fourth sentences and inserting in lieu thereof the following: 
     ``The amount of the payment bond shall be equal to the total 
     amount payable by the terms of the contract unless the 
     contracting officer awarding the contract makes a written 
     determination supported by specific findings that a payment 
     bond in that amount is impractical, in which case the amount 
     of the payment bond shall be set by the contracting officer. 
     In no case shall the amount of the payment bond be less than 
     the amount of the performance bond.''.
       (b) Modernization of Delivery of Notice.--Section 2(a) of 
     the Miller Act (40 U.S.C. 270b(a)) is amended in the last 
     sentence by striking ``mailing the same by registered mail, 
     postage prepaid, in an envelope addressed'' and inserting 
     ``any means which provides written, third-party verification 
     of delivery.''.
       (c) Nonwaiver of Rights.--The second section of the Miller 
     Act (40 U.S.C. 270b) is amended by adding at the end the 
     following new subsection:
       ``(c) Any waiver of the right to sue on the payment bond 
     required by this Act shall be void unless it is in writing, 
     signed by the person whose right is waived, and executed 
     after such person has first furnished labor or material for 
     use in the performance of the contract.''.

     SEC. 3. IMPLEMENTATION THROUGH THE GOVERNMENT-WIDE 
                   PROCUREMENT REGULATIONS.

       (a) Proposed Regulations.--Proposed revisions to the 
     Government-wide Federal Acquisition Regulation to implement 
     the amendments made by this Act shall be published not later 
     than 120 days after the date of the enactment of this Act and 
     provide not less than 60 days for public comment.
       (b) Final Regulations.--Final regulations shall be 
     published not less than 180 days after the date of the 
     enactment of this Act and shall be effective on the date that 
     is 30 days after the date of publication.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
California (Mr. Horn) and the gentleman from Texas (Mr. Turner) each 
will control 20 minutes.
  The Chair recognizes the gentleman from California (Mr. Horn).
  Mr. HORN. Mr. Speaker, I yield myself such time as I may consume.
  I include for the Record at this point a letter from the chairman of 
the Committee on the Judiciary, the gentleman from Illinois (Mr. Hyde), 
agreeing to the discharge of the Committee on the Judiciary from 
further consideration of H.R. 1219.

[[Page H6777]]

                                         House of Representatives,


                                   Committee on the Judiciary,

                                    Washington, DC, June 18, 1999.
     Hon. Dan Burton,
     Chairman, Committee on Government Reform, House of 
         Representatives, Washington, DC.
       Dear Chairman Burton: I understand that the Government 
     Reform Committee desires to take H.R. 1219, the 
     ``Construction Industry Payment Protection Act,'' to the 
     floor without this committee reporting the bill. The bill 
     contains certain matters within the Rule X jurisdiction of 
     the Judiciary Committee which were the basis of the bill's 
     referral to us. Such matters include amendments to the Miller 
     Act made by section 3 and procedural rules for promulgating 
     revisions to the Federal Acquisition Regulation established 
     by section 4.
       In the interest of moving this non-controversial bill 
     forward expeditiously, I will agree to the Judiciary 
     Committee being discharged from further consideration of H.R. 
     1219. However, this should not be construed as a 
     relinquishment of the Committee's Rule X jurisdiction as to 
     the matters addressed by the bill or any further amendments 
     relating to it.
       Please place a copy of this letter in the record of debate 
     on the bill.
           Sincerely,
                                                    Henry J. Hyde,
                                                         Chairman.

  Mr. Speaker, H.R. 1219, the Construction Industry Payment Protection 
Act of 1999, is a bill introduced by my colleague, the gentlewoman from 
New York (Mrs. Maloney). It would modernize the 1935 Miller Act.
  Under the Miller Act, contractors performing work on a Federal public 
works project costing in excess of $100,000 are required to furnish a 
payment bond. The payment bond is intended to protect subcontractors 
and suppliers and materials against the risk of nonpayment when working 
on Federal construction projects.
  The Act also requires a performance bond to guarantee completion of 
the project.
  In addition, the Miller Act requires the contractor to provide a 
performance bond that guarantees completion of the project.
  The 1935 Act caps the total amount of the payment bond at $2.5 
million. Although that amount might have been appropriate for public 
works projects in 1935, in many cases today it no longer provides 
subcontractors with adequate protection.
  Today, more than half of all Federal construction projects exceed 
$2.5 million. H.R. 1219 seeks to correct this problem by requiring 
general contractors to obtain payment bonds of an amount equivalent to 
the total value of the contract.
  As noted, H.R. 1219 would require general contractors to obtain 
payment bonds of an amount equal to the total contract price unless the 
contracting officer makes a written determination that a payment bond 
in that amount is impractical. However, under no circumstances can the 
amount of the payment bond be less than the amount of the performance 
bond.
  The bill also would expand the methods by which the subcontractors 
could use to notify the prime contractor of their intent to seek 
payment from the payment bond. It permits notice by any delivery 
service that provides written third-party verification of delivery, 
including the United States Postal Service or a private express 
delivery service.
  Moreover, the bill would require that any waiver of the Miller Act 
protections by a beneficiary of those protections must be in writing 
and may be made only after a subcontractor or supplier has furnished 
labor or materials for use in the performance of the contract.

                              {time}  1500

  The bill also requires that the Office of Management and Budget issue 
final regulations implementing these provisions not less than 180 days 
after enactment of this legislation.
  H.R. 1219 represents a bipartisan effort to update the 1935 Miller 
Act. This bill contains proposals to amend the Miller Act that address 
some of the concerns of a variety of trade associations representing 
essentially every segment of the construction and surety industries. 
Our thanks go to the Democrats and Republicans who have worked together 
long and hard to bring this important bipartisan measure to the floor.
  I was pleased to be a cosponsor of the gentlewoman from New York's 
bill, the prime author, and the gentleman from Virginia (Mr. Davis) was 
also one of the key people in assuring that these different parties 
came together. The time has come to modernize the Miller Act. I urge my 
colleagues to support this measure.
  Mr. Speaker, I reserve the balance of my time.
  Mr. TURNER. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, this bill was introduced by the gentlewoman from New 
York (Mrs. Maloney) as a means of addressing some very serious concerns 
surrounding the bond requirements established in the Miller Act of 
1935. I want to commend the gentlewoman from New York for her 
leadership in this legislation, specifically her work in bringing all 
the parties together that have an interest in this bill, working with 
them, ensuring that all of the concerns that were laid on the table by 
all of the parties were addressed. She did an outstanding job in 
working in a very bipartisan way on this bill.
  Specifically, subcontractors who perform construction projects for 
the Federal Government have raised questions about the adequacy of the 
payment bond requirement. The gentlewoman from New York as a member of 
the Committee on Government Reform, former ranking member of the 
Subcommittee on Government Management, Information, and Technology, has 
been persistent in trying to correct the deficiencies of the current 
law.
  H.R. 1219 would remedy these problems and ensure that the payment 
bond is great enough to protect all of the subcontractors. At the same 
time the legislation will modernize and strengthen the Miller Act and 
will provide a means of improving a relationship of the subcontractors 
that has been long needed.
  This bill was reported by the Committee on Government Reform on May 
19 by voice vote. The measure has also been referred to the Committee 
on the Judiciary which has discharged the bill. I would like to thank 
particularly the gentleman from Pennsylvania (Mr. Gekas) and the 
gentleman from New York (Mr. Nadler) for their help in crafting this 
bill.
  Mr. Speaker, I reserve the balance of my time.
  Mr. HORN. Mr. Speaker, I yield such time as he may consume to the 
gentleman from Virginia (Mr. Davis). He has done an outstanding job in 
bringing many of the parties together on this particular bill and we 
deeply appreciate his work on it.
  Mr. DAVIS of Virginia. Mr. Speaker, I thank the chairman of the 
subcommittee for yielding me this time and I particularly thank the 
author of this bill the gentlewoman from New York who has worked, I 
think, over and beyond the usual call of duty in trying to bring 
consensus to something very technical but I think something very 
meaningful to government contractors and subcontractors and sureties.
  I rise today in support of H.R. 1219, the Construction Industry 
Payments Act of 1999.
  This is legislation we have been involved with since the 105th 
Congress when the gentlewoman from New York began working with the 
affected industry groups to find consensus on updating the original 
Miller Act of 1935. I am happy to say that this bipartisan cooperation 
resulted in a strong bill that industry, Congress and the Federal 
Government can all support. It is fiscally responsible and it offers 
reasonable protections to all parties involved in this type of Federal 
procurement.
  H.R. 1219 amends the 1935 Miller Act which has stood the test of time 
very well. It has needed relatively little legislative attention or 
congressional oversight since its passage. Currently, the Miller Act 
requires a contractor awarded a Federal contract in excess of $100,000 
to furnish the government with a performance bond and a payment bond. 
These bonds protect the government and certain persons providing labor 
and material for performance of that work. H.R. 1219 prepares the 
Miller Act for the 21st century. It should achieve its objectives 
without unreasonably increasing the financial exposure or placing 
additional burdens on the prime contractor or the surety bond producers 
and corporate sureties that provide Miller Act bond payments. It 
modernizes the act in three areas: The legislation raises the payment 
bond to the value of the contract award, allows receipt of notice 
through any method that provides written third

[[Page H6778]]

party verification of receipt, and it prevents any waiver of the Miller 
Act rights prior to the commencement of the work. These three key 
updates of the 1935 legislation enhance the procedures and protections 
of the Miller Act for the government and those with rights under the 
act as we continue to update our procurement procedures the next 
century.
  I am particularly impressed with H.R. 1219 and the reasonable updates 
of the Miller Act that allow it to be particularly effective in 
protecting all parties in the contracting process. Not only does it 
preserve the authority of the United States courts to adjudicate issues 
under the Miller Act but it preserves the freedom of the contractor and 
the subcontractor to choose within their own contract the particular 
dispute resolution process that will govern their dispute. This is an 
effective reform that focuses on everyone's goal, providing the best 
product to the Federal Government in a timely manner. Additionally, 
H.R. 1219 maintains a subcontract provision that allows for requiring 
arbitration or another alternative dispute resolution process. A 
protected person's Miller Act rights would be preserved by a timely 
suit in the District Court that can be stayed pending the subcontract 
dispute resolution process.
  Simply put, this legislation modernizes the procedures and 
protections of the Miller Act, preserves the exclusive jurisdiction of 
the U.S. District Court to resolve issues arising under the Miller Act, 
and respects the freedom of the contractor and subcontractor to choose 
their own dispute resolution process, thereby bolstering the Federal 
Government's strong policy in favor of alternative dispute resolution.
  Finally, I want to again thank the gentlewoman from New York for her 
willingness to sit down and negotiate on this legislation what appeared 
to be differences too great to overcome in the waning days of the 105th 
Congress. Instead this has resulted in a strong, updated Miller Act 
early on in this Congress. I believe the extensive negotiations between 
the gentlewoman from New York, myself and others distilled the key 
elements of the Miller Act to address and improve future situations in 
Federal contracting. H.R. 1219 is legislation that both enhances and 
preserves the 1935 legislation. This could not have occurred without a 
willingness to build consensus or work together. I would also like to 
thank the many industry organizations that agreed to sit down and come 
up with reasonable compromises that helped us develop the strong bill 
before us today. In particular, I want to thank the Associated Builders 
and Contractors of America, the Surety Association of America, the 
American Insurance Association, and other organizations that I will 
insert in the Record.
  I urge the passage of this bill. I would also like to thank Amy 
Heerink and Melissa Wojciak from my staff.

  Additional Industry Groups Who Assisted in Drafting the Miller Act, 
            H.R. 1219, the Construction Industry Payment Act

     Air Conditioning Contractors Association
     American Insurance Association
     American Subcontractors Association
     Mechanical Contractors Association of America
     National Association of Plumbing-Heating-Cooling Contractors
     National Association of Surety Bond Producers
     National Electrical Contractors Association
     Painting and Decorating Contractors of America
     Sheet Metal & Air Conditioning Contractors National 
         Association
     Surety Association of America
     American Fire Sprinkler Association
     Architectural Woodwork Institute
     Association of the Wall & Ceiling Industries-International
     Automatic Fire Alarm Association
     Independent Electrical Contractors
     Mason Contractors Association of America
     National Association of Credit Management
     National Ground Water Association
     National Insulation Association
     World Floor Covering Association

  Mr. TURNER. Mr. Speaker, it is an honor for me to yield such time as 
she may consume to the gentlewoman from New York (Mrs. Maloney). I too 
would like to thank the gentlewoman for the leadership she has provided 
on this bill. She has spent more time working on this than any other 
Member of this House. She is the sponsor of this bill.
  Mrs. MALONEY of New York. Mr. Speaker, I thank the ranking member for 
yielding me this time and I thank him for his leadership and support.
  The best legislation is bipartisan and this has truly been a 
bipartisan effort over the past 3 years. I particularly congratulate 
the gentleman from California (Mr. Horn) with whom I have worked in a 
constructive way on many pieces of legislation before this body and the 
gentleman from Pennsylvania (Mr. Gekas) who likewise led on this effort 
and the gentleman from Virginia (Mr. Davis) who led actually a task 
force over the last summer between the different bodies that came 
forward with a consensus and compromise bill. And finally the 
stakeholders, all of the industries involved, over 25 industries came 
together and signed their own contract in support of the legislation 
and their pledge to work to pass it. So it has indeed been a combined 
effort which will ultimately not only help the employers and the 
employees but the American taxpayer, because the cost of the jobs will 
go down because those bidding on them will know that the risk of not 
being paid will now be covered and that risk will not be built into 
their bid. So it has been a day where everyone benefits in our country 
and I am very proud to have been part of the team that made this 
happen.
  This is truly a historic day for the construction industry and their 
workers. Today we are passing bipartisan legislation that will restore 
full payment protection for construction firms and their employees who 
do business with the Federal Government. Thanks to this bill, 
subcontractors who work on Federal projects will actually be paid and 
will not have to worry about being paid for their work. H.R. 1219 will 
modernize the 65-year-old Miller Act which was passed in 1935 to 
provide payment protection for construction subcontractors and 
suppliers. Under the Miller Act, prime contractors on Federal projects 
are required to purchase two types of surety bonds, one, the 
performance bond which assures the government that the work will in 
fact be completed, and a second, the payment bond that provides payment 
protection for subcontractors and suppliers. The payment bond is 
critical, because it is the payment protection of last resort in the 
event of a default on the part of the prime contractor. Yet under the 
Miller Act's depression era requirements, prime contractors are not 
required to obtain a payment bond equal to the full value of the 
contract. In fact, for contracts of $5 million or more, the payment 
bond need not be worth more than $2.5 million regardless of the size of 
the project. Since 1935, Federal construction projects have changed 
dramatically in size and dollar value. The protections afforded by the 
Miller Act may have been adequate in 1935, but they are simply not 
sufficient for today. In fact, if the value of $2.5 million were simply 
adjusted for inflation, it would now be at least $30 million. With 
Federal construction projects costing hundreds of millions of dollars, 
$2.5 million is simply not enough to provide payment protection for 
subcontractors, particularly those working in the later stages of 
complex, multi-year construction projects.
  Earlier this year, President Clinton announced that the Federal 
Government, along with Senator Moynihan, would be taking the lead in 
renovating the Farley Building in my home city of New York as part of 
the Penn Station mass transit redevelopment project. It is estimated 
that this project will cost almost $400 million. Now, under the Miller 
Act, the general contractor would only be required to furnish a payment 
bond worth $2.5 million, clearly not enough to provide protection for 
subcontractors and suppliers and their workers on a $400 million 
project. But thanks to this legislation that we are about to pass 
today, the subcontractors working on the Farley Building will actually 
be paid and will enjoy full payment protection.
  I learned firsthand about the problems of the Miller Act when I was 
contacted by one of my constituents, Fred Levinson, in 1997. Fred owns 
a subcontracting firm in my district. Fred Levinson was hired to work 
on a project for the Federal Bureau of Prisons for over $100 million. 
But when the prime contractor on the building was terminated, Mr. 
Levinson was left without any way to collect the money he was owed for 
the work that he performed. As a result, he lost $9.5 million simply 
because the Miller Act did not provide for full payment protection. Mr. 
Levinson was fortunate enough to

[[Page H6779]]

be able to save his company, but this payment problem still forced him 
to lay off employees and scale back his business. Other subcontractors 
on big Federal projects are simply not so lucky and risk bankruptcy 
when the prime contractor defaults.
  Thanks to this bill, no subcontractor in the future, including those 
working on the Farley Building or any Federal building, will have to 
suffer from inadequate payment bond protection as did my constituent 
Fred Levinson. This is also, I might add, a case study in democracy, an 
example of how one person can come to a legislator, point out a 
problem, and work with them to solve it and to make a difference. I 
would like to dedicate my work on this bill to Fred Levinson, who 
brought it to my attention.
  Mr. Speaker, as someone who has long been interested in Federal 
procurement policy, I can speak firsthand to the importance of full and 
timely payment to all segments of the construction industry. In 
particular, small firms face enormous risks when they are not paid for 
work they complete. Many firms across the country have risked 
bankruptcy simply because they were not paid on time or in full by a 
project owner. Cases in which the Federal Government is the owner of 
the project are certainly no exception.

                              {time}  1515

  This bill will make three important changes to the Miller act.
  First, it will require that prime contractors working on Federal 
projects furnish a payment bond of a value equal to the value of the 
contract they have been awarded. This provision will ensure full 
payment protection for subcontractors who choose to work on Federal 
projects. They will no longer be a $2.5 million limit.
  Second, this bill will modernize the provisions of the Miller act 
which deal with notification of an intent to make a claim on a payment 
bond. Current law permits notification only by certified mail. Under 
this bill, notification will be permitted by any means that permits 
written third-party notification of delivery. In this era of overnight 
mail and electronic commerce, it simply makes no sense to permit 
notification only through registered mail.
  Finally, this bill includes a provision that prohibits any waiver of 
the right to sue under a payment bond unless that waiver is signed by 
the person whose right is waived after they have commenced work on the 
project. This will ensure that no subcontractor waives his or her right 
to sue before beginning work on a project. This provision is critical 
to protecting the rights of subcontractors throughout the bidding 
process and beyond.
  I always believe that the best legislation is bipartisan, and that is 
certainly true in this case. This legislation enjoys broad support from 
Members across the political spectrum. This bill grew out of a hearing 
that was held jointly by my friend from California (Mr. Horn) and my 
friend from Pennsylvania (Mr. Gekas).
  At that hearing we heard from several witnesses who spoke on the need 
to modernize the act, including my constituent Fred Levinson and one of 
Chairman Gekas' constituents, Micki Weaver. Mrs. Weaver, who owns a 
small specialty firm told of how the inadequacies of the Miller act led 
her to avoid bidding altogether on future Federal projects.
  Both the gentleman from California (Mr. Horn) and the gentleman from 
Pennsylvania (Mr. Gekas) agreed that the Miller act needed to be 
modernized and joined me as an original sponsor. I am very grateful for 
their hard work as well as that of their staffs and my own, staff which 
have helped to get us to where we are today. In addition, the gentleman 
from Indiana (Mr. Burton) and the gentleman from Illinois (Mr. Hyde) 
both were instrumental in moving this bill through the legislative 
process, as were the ranking members, the gentleman from California 
(Mr. Waxman) and the gentleman from Michigan (Mr. Conyers).
  My friend from Virginia (Mr. Davis) took the lead in getting everyone 
involved in this issue to agree to sit down at the table and negotiate 
so that we could reach the agreement on the legislation we have before 
us today. In addition, many other Members of this House, including the 
gentleman from Florida (Mr. Scarborough), the gentleman from Texas (Mr. 
Sessions), the gentleman from Texas (Mr. Smith), and the gentleman from 
Pennsylvania (Mr. Kanjorski) have supported and worked on this 
legislation from the beginning and were very instrumental in moving it 
to the floor today.
  Equally important, Mr. Speaker, is the hard work that many of the 
industry groups have done. I am pleased that every industry group with 
an interest in modernizing the Miller act supports this bipartisan 
legislation. This bill enjoys the backing of at least 25 industry 
organizations, all of which have had a vested interest in the payment 
bond protection afforded by the act.
  In particular, I would like to thank the American Subcontractors 
Association which has spearheaded the broad-based coalition to 
modernize the Miller act for their hard work on this bill as well as 
that of the Associated General Contractors of America and the Surety 
Association of America, both of which played a critical role in the 
negotiations which led to this bill.
  Mrs. MALONEY of New York. Mr. Speaker, finally I am very pleased to 
announce that the administration has recently said that it, too, 
supports the bill. This bill will bring about a common sense reform 
that will make a tremendous difference for construction subcontractors 
and their workers who do business with the Federal Government. It will 
not cost the taxpayers anything, and in fact it might lower the cost of 
Federal projects.
  Mr. Speaker, I urge all Members to support this important bipartisan 
bill.
  Mr. TURNER. Mr. Speaker, I have no further requests for time, and I 
yield back the balance of the time.
  Mr. HORN. Mr. Speaker, I yield myself such time as I may consume.
  I just want to, in conclusion, note that the gentleman from Texas 
(Mr. Turner), the ranking minority member on the subcommittee, has been 
very helpful on this; and I mentioned earlier, I will mention again, 
the gentleman from Pennsylvania (Mr. Gekas) is a very distinguished 
legislator from Pennsylvania and a key person on the Committee on the 
Judiciary, and the gentleman from Illinois (Mr. Hyde) gave the waiver 
of this bill to the floor, and we are extremely grateful for that 
bipartisan, bi-committee cooperation.
  But in closing, I want to say to the gentlewoman from New York (Mrs. 
Maloney) who put it right on the nose, this is a case study in 
democracy. Everyone that is listening or hearing or reading the Record 
is going to see this is an example of a constituent walking through 
their Representative's door and say, Look, I've had a problem here. Can 
you do anything about it? A lot of us have had that experience, and the 
fact is people do not need to go through lobbyists; they do not need to 
go through people that are at PAC parties or anything else. They can 
just walk into their legislator, and if they got a good case, something 
will happen. The gentlewoman from New York (Mrs. Maloney) showed 
something that happened, and all of us cooperated to do it because we 
knew this was just and we needed to update that law, and I would hope 
that we have a unanimous vote of the House.
  I want to thank my own majority staff, George, the chief counsel and 
staff director, Randy. The counsel and professional staff member have 
worked with the staff of the gentlewoman from New York (Mrs. Maloney) 
and the staff of the gentleman from Pennsylvania (Mr. Gekas), and we 
thank them all for their help. I urge adoption of this measure.
  The SPEAKER pro tempore. The question is on the motion offered by the 
gentleman from California (Mr. Horn) that the House suspend the rules 
and pass the bill, H.R. 1219, as amended.
  The question was taken.
  Mr. HORN. Mr. Speaker, on that I demand the yeas and nays.
  The yeas and nays were ordered.
  The SPEAKER pro tempore. Pursuant to clause 8 of rule XX and the 
Chair's prior announcement, further proceedings on this motion will be 
postponed.

                          ____________________